According to the present taxonomical treatment, Paeonia subsect. Delavayanae consists of only two species (P. delavayi and P. ludlowii) endemic to the Himalayan-Hengduan Mountains. Although P. ludlowii can be distinguished from P. delavayi on the basis of a series of morphological characters, the species delimitation remains controversial because the more widespread one, P. delavayi, exhibits considerable morphological diversity. Both chloroplast DNA markers and nuclear microsatellites or simple sequence repeats (nSSR) are used herein to reveal genetic diversity and relationships of the two taxa included in this subsection, and ecological niche modeling (ENM) is employed to get insights into their paleodistribution. Our results show that genetic boundaries between the two currently recognized species are unclear, probably due to recent divergence. Paeonia ludlowii is budding from P. delavayi, probably by genetic isolation but also by shifting its niche to the harsher upland Tibetan conditions. Paeonia delavayi itself would be, however, under active speciation, showing significant genetic differentiation and morphological diversity. Whereas P. ludlowii would have endured the Pleistocene glacial periods by in situ persistence in local, small refugia, a 'dual' model seems to apply for P. delavayi (in situ persistence and retreat to refugia). The rarity of P. ludlowii and high evolutionary potential of P. delavayi imply high priority for in situ conservation of both taxa. The Himalayan-Hengduan Mountains are an ideal arena for differentiation within subsect. Delavayanae of Paeonia, by means of expansions/contractions/displacements, vertical migrations, and local survival/extinctions in response to the Neogene climate fluctuations and geological changes.